Wal-Mart eyes Australia

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WAL-MART, the world's biggest retailer, which last week gave up
on Germany, is reportedly looking at trying its luck in Australia
and is sizing up our two biggest supermarket operators, Coles Myer
and Woolworths.

The UK's Sunday Telegraph reported Wal-Mart - valued at
$US185 billion ($242 billion) - "is believed to be close to making
its first acquisition in Australia".

It said that executives from Wal-Mart, which is based in
Bentonville, Arkansas, recently visited Australia to look at
possible targets.

Coles Myer, with a market value of nearly $14 billion, and
Woolworths, valued at more than $22 billion, were reported to "have
been identified as likely candidates".

The timing of the speculation could not be worse for Coles Myer
chief John Fletcher. Today he announces details of his new
strategy, designed to help the company catch up with Woolworths,
whose sales and market share are growing faster.

Talk of Wal-Mart's interest will also steal the thunder of an
expected name change - possibly to Coles Ltd or Coles Group -
following the sale of the Myer department store business and the
expected rebranding of the group's discount supermarket operations,
Bi-Lo, as Coles.

"Wal-Mart has been looking at Australia closely," an executive
close to Wal-Mart told the UK's Sunday Telegraph. "After the
German situation it will be looking to do a deal very quickly."

Coles Myer spokesman Scott Whiffin said the company did not
comment on market rumours.

Coles has offloaded its underperforming Myer department store
chain for $1.4 billion to a private equity firm in favour of
focusing on its supermarket and alcohol businesses.

The market has since re-rated the group as its remaining core
businesses are more attractively valued and offer scope for
corporate activity.

While Coles Myer sources have played down recent reports that
the company was seeking to adopt a strategy like Wal-Mart's, they
were not forthcoming last night about any talks regarding a closer
relationship with the US retailer.

Woolworths spokeswoman Clare Buchanan did not return the
Herald's calls.

A Wal-Mart spokeswoman declined to comment to the Sunday
Telegraph. Executives close to Wal-Mart suggested any deal was
some time off, the paper said.

Australian investors last night did not rule out the possibility
of Wal-Mart taking an interest in Australia but noted the higher
growth potential in Asian countries, including China. It was noted
that Woolworths already emulates Wal-Mart's business model.

Despite quitting Germany, any move into Australia would see
Wal-Mart up against the aggressively expanding German discount
supermarket chain, Aldi.

Last week Wal-Mart, led by Lee Scott, announced the sale of its
85 German outlets to rival operator Metro. The company had
difficulty appealing to German tastes.

Wal-Mart is expected to make a $US1 billion pre-tax loss in the
second quarter of its financial year.